Endowment Advice welcomed

deport

I took out an endowment mortgage in late 1988 which has just matured.
The mortgage sum was settled leaving less than £3000.
I was, as were many people at the time, promised more than double the
£29,000 I borrowed so have finished with a shortfall of some £30,000.

I made a misselling claim a couple of years ago and liability was admitted
regarding several issues and an offer of redress was made. This offer proposed that I convert to a repayment mortgage and offered a surrender value sum of £10,000 less than they have just paid on the endowment.

Doing a quick calculation, had I accepted thier offer they would have
gained about £7000 coupled with the £30,000 shortfall the Endowment Company would have robbed my retirement fund of some £37,000.

Maybe someone has had a similar experience, in any case I would appreciate any solid advice.

EdInvestor

Maybe someone has had a similar experience, in any case I would appreciate any solid advice.

I fear many people's reaction will be that you are the lucky one, since at least your mortgage was paid off.

Which company was this?

dunstonh

So, you have made more money by holding on to the endowment. This is not an unusual situation as the redress for people between late 2001-2003 was during a period before the stockmarket had recovered. Also, it is based on surrender value and not the current value (or current position).

There have been a number of press articles recently which have had comments that say we should expect to see most 25+ year endowments return to paying surpluses although any term less than 25 years is going to find it very hard and will probably fail.

So those with a good 25 year endowment who have been paid a redress value could find that this turns out to be free money.

EdInvestor

We don't know anything about this endowment: if it was a unit-linked one, then the recovery is unsurprising. It's a bit more complex with WP endowments and depends a lot on which company they are with - and often which WP fund within the company.

Just because the market has bounced back over the past 3 years doesn't mean endowments are suddenly going to come good:the FTSE is still below its peak.Most endowments are too badly wounded by high charges and the new FSA reserving requirements to ever do much - especially the ones that were set impossible targets in the first place.

deport

Thanks Edinvestor and Dunstonh for your response. The company is Legal & General and although there was a small surplus to the target amount this was only achieved because the premiums were almost doubled half way through the term, on the grounds that the maturity date was two years past normal retirement age and the building society insisted it was brought forward.

I feel that the lives of many have been ruined by the synical and unjust behavior of companies that have the resources to rectify their mistakes, but who instead attempt to further con their custumers by offering pathetic surrender values and deals which altimately benifit themselves.

The penalty for mis-selling is ????

Maybe a 'no win no fee' layer is the next step.

jonteague

The penalty for mis-selling is ????

The penalty for mis-selling is that the lifeco has to get you back to where you would have been had you taken out a repayment mortgage instead.

You can't complain because an investment you enetered into did not perform as the salesman suggested it might, their projections are always covered in caveats (even if you didn't read them or appreciate what they meant). Remember the salesman didn't (at least should not have) told you gaining a £29k surplus was a dead cert, he merely gave you an illustration that if things continued the way they thought they might that is what would happen, certainly the paperwork will have made this crystal clear even if the salesman was less than candid.

At the time you started the endowment the projection calculations were done according to what were then seen as resonable gains but with hindsight were too great.

You have come out with your endowment more than covering your mortgage - consider yourself fortunate and put to bed any crazy ideas of sueing someone because you won't get anywhere.

Jon.

dunstonh

I feel that the lives of many have been ruined by the synical and unjust behavior of companies that have the resources to rectify their mistakes, but who instead attempt to further con their custumers by offering pathetic surrender values and deals which altimately benifit themselves.

Its not as easy as that though. Its easy to look back in hindsight but if you are going to do that, then you need to include all variables.

For example, many endowment mortgages were cheaper than repayment mortgages. From personal experience, that is why most people I sold endowments to took them out. You also had MIRAS tax relief back then and going back into the 1980s, you had LAPR tax relief on endowment premiums making them a lot cheaper than repayment mortgages.

Endowments worked well in a high interest rate, boom/bust economy. If that had continued, you would have seen endowments still paying out double what they needed. However, low interest rates and a stable economy have allowed property prices to flourish and people to become better off overall.

No-one saw the change in the economy coming and anyone that did is telling lies. Over 70 insurers have closed their doors in the last 7 years. They certainly didnt see it coming. Once great names have vanished into the hands of vulture capital companies to be run down over time.

With most 25 year endowments expected to go on to provide a surplus, despite what the projection letters say and a number of these would have been paid redress as well, the current system is pretty useless at making sure the right people get the right redress.

The penalty for mis-selling is ????

millions of pounds of redress payments being made, tens of thousands of advisers being put out of a job. Over 70 insurers closing their doors for new business, the end of with profits as a mainstream fund (which was more profitable than unit linked), increased PI insurance for independent firms with PI claims against them. All this in the end will lead to improved standards with the weakest companies gone, the worst financial advisers pushed out because they cannot get another job because of their complaints record and experience that you must document things better in future.

Maybe a 'no win no fee' layer is the next step.

it already costs nothing to complain. That level already exists.

angela110660

Although there has been a large cull of insurance firms over the last few years leaving the better (allegedly) ones to continue; is it not a case that people with endowment policies tied to their mortgages are really never going to see much improvement in the fortunes of their policies? Surely, these policies have lost so much favour with both financial advisors and insurers that they will not be interested in putting as much energy into maintaining the future of them. Less investment in these areas by the general public means there is less money for future payouts to those who hang in there. Endowments like many insurance policies that have been invented over the years,were given a great push and taken great interest in when they were profitable to the sellers; they become the poor relative as the years went by and newer, exciting ways to procure premiums off the investor appeared.

EdInvestor

Endowments worked well in a high interest rate, boom/bust economy. If that had continued, you would have seen endowments still paying out double what they needed. However, low interest rates and a stable economy have allowed property prices to flourish and people to become better off overall.

This is the fundamental rreason high charge policies and funds like WP have passed their sell-by date.Fortunately most endowment investors have profited because of the rise in house prices.Other WP investors have not done so well.

No-one saw the change in the economy coming and anyone that did is telling lies. Over 70 insurers have closed their doors in the last 7 years. They certainly didnt see it coming.

Maybe they didn't see the change in the economy coming, but the demise of WP (and mutuals, who started it) has been the written on the wall for many years - the UK is the only country with any WP industry left.

dunstonh

is it not a case that people with endowment policies tied to their mortgages are really never going to see much improvement in the fortunes of their policies?

Those with with profits funds in the weaker insurers are not going to see much, if any improvement. They should be investigating whether it is best to stay or go. Those in the stronger with profits funds (which is really NU and Pru) or unit linked funds from the rest have seen large increases, above the required level or the projection letter levels in the last 3 years. This has put many back on track or very close.

Surely, these policies have lost so much favour with both financial advisors and insurers that they will not be interested in putting as much energy into maintaining the future of them.

There is no market for these at all. Indeed, the only companies left still marketing them are those that sell direct to consumer. I.e. the consumer buys them without advice.

Less investment in these areas by the general public means there is less money for future payouts to those who hang in there.

It doesnt work that way. A closed insurance company has less pressure on its liaiblities and can run at lower costs. There are some good with profits funds from the closed insurers, although they tend to be from names you may not have heard of. The once big names you would have heard of but now gone, tend to have the weaker funds. Unit linked funds are based on the performance of the holdings and not the size of the holdings. Indeed, smaller funds can often be more dynamic and outperform the larger funds which cannot switch investments around as quickly.

Maybe they didn't see the change in the economy coming, but the demise of WP (and mutuals, who started it) has been the written on the wall for many years - the UK is the only country with any WP industry left.

I think they were hoping that the switch to unitised with profits would have been the answer. To some extent it would have been but the switchover didnt come quick enough and the stockmarket crash came at the wrong time for it.

angela110660

Personally having our endowment with Standard Life and stuck in With Profits we are now at the point of deciding whether or not it is worth hanging in there or bailing it.